ASB Unitholders Get 8.9% Dividend & Bonus for 2012

Amanah Saham Bumiputera (ASB) unitholders will receive a dividend of 7.75 sen and a bonus 1.15 sen per unit for the financial year ending 31st December 2012. This brings a total of 8.9 sen distribution income for year 2012.

This dividend is 0.1 sen higher compared to 7.65 sen declared in 2011 while there is no change in bonus.

Currently, there are 7.82 million ASB unitholders in 2012 compare with 7.3 million unitholders in 2011. The total fund size also increase to 110.2 billion from 95.9 billion units in the same period.

The dividend involved a total payout of RM8.13bil and the bonus portion of RM712.21mil. As of 19th December, ASB registered a gross income of RM8.54bil.

Dividend income from investee companies contributed RM4.80bil, or 56.21%, of the gross income and profit from the sale of shares contributed RM2.68bil or 31.38%. The remaining 12.41%, or RM1.06bil, was derived fromother income.

The income distribution and bonus would be automatically credited into the respective unitholder’s account. Unitholders could update their accounts beginning 3rd January 2012 at ASNB branches or agents nationwide.

All ASB transactions will be suspended starting from 18th December 2012 to 1st January 2013 to facilitate the calculation of income distribution and bonus.

Interesting question!
I have done this calculations thoroughly. It is quite tricky to explain but nevertheless, I have the answer now. Putting the math aside, in short the answer is:

YES, you will make money. The money you will make is due to leveraging using your credit history and your promises of paying the bank the loan extended. This leveraging is similar as someone extending you a loan and you go on and make money on it, higher than the interest on the loan. Someone with zero money can make money using OPM (other people’s money).

The spread of making money and the loan extended is quite thin, therefore the amount of money you will make is quite razor thin also.

Now, on the conditions and risks are the following:

1. You will need to trouble yourself of obtaining a loan, and paying it for years to come. I do not like this part at all.
2. You will lock your money in something that you cannot touch for years to come, so if there is other opportunities and places where you can suddenly make more, you can’t clinch that opps.
3. If you suddenly need a lot of money, you will have to go a lot of trouble to get back your own money because it is locked. I don’t like this part one bit.
4. There is a risk that ASB return can be lower than the interest you would be paying. With razor thin spread and profit margin, i do not like this risk at all.
5. The bank is guaranteed to make money but for you, you are the person guaranteeing that to the bank and nobody is guaranteeing your money. However I take note that PNB is closely linked to the gov so maybe the gov will bail you out, however please take further note that the gov simply use your money anyway to bail you out (can take it from your tax money, EPF etc.).
6. If you have to borrow money to invest, you should not invest. In our third book of the series, myself and my co author mentioned that you should first invest in the most important person in the room..none other than yourself. Don’t invest in other people e.g. using the stock market because your returns will be very low. However if you have surplus money and has invested all you should to yourself, then it is ok.

Due for the many conditions and risks above, I decided it is not a good risks to take, and the returns are sub par, so i do not do this ASB loan scheme.

Other people may have additional answers and reasons, so maybe they can chip in.

I do not agree with the comments made by Sharif Rahman.
a. 5. [The bank is guaranteed to make money but for you, you are the person guaranteeing that to the bank and nobody is guaranteeing your money] – this applies to all types of loans, not only ASB loans
b. 1. You will need to trouble yourself of obtaining a loan, and paying it for years to come. I do not like this part at all.
2. You will lock your money in something that you cannot touch for years to come, so if there is other opportunities and places where you can suddenly make more, you can’t clinch that opps.
3. If you suddenly need a lot of money, you will have to go a lot of trouble to get back your own money because it is locked. I don’t like this part one bit. [This applies to all types of loan, not only ASB]
c. ASB returns vs interest paid are not ‘razor thin’. Interest Rate on ASB is BLR – 0.50% (i.e. 6.++%), the dividend is already > 8.00% for past 4 years
d. I have taken an ASB loan in 2004 for a 10 yr loan period. Towards the end of the tenure, your cumulative return interest-on-interest is more than enough to even cover your future installment.

Jogho, from my point of view, it is depend on your risk appetite. But so far people who did ASB loan manage to get 2-3% extra but who knows in the future. ASB income may be less that the interest you pay to the bank like what Shariff said.

Thank you to everyone who have given their opinion. I truly appreciate your advice and suggestions, and I’m sure many others too. I guess like any other investment, you must know what you are getting into, you should regularly monitor its performance and also determine for yourself whether it is worth to continue or to find other better investment opportunities.